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USDA projects 12% drop in net farm income

Farm sector net farm income in 2018 is expected to decline $9.1 billion (12.1%) from 2017 to $66.3 billion, according to the Economic Research Service's latest income forecast. Although down for the year, it was up from the agency’s previous estimate in August.

Farm sector net cash income in 2018 is expected to decline $8.5 billion (8.4%), to $93.4 billion, which would be the lowest real-dollar level since 2009. Net cash farm income encompasses cash receipts from farming as well as farm-related income, including government payments, minus cash expenses. Net farm income is a more comprehensive measure that incorporates noncash items, including changes in inventories, economic depreciation, and gross imputed rental income of operator dwellings.

Farm business average net cash farm income is forecast to decline $13,500 (16.2%) to $69,800 in 2018. This would be the 4th consecutive decline since 2014 and the lowest average income recorded since the series began in 2010. Every resource region of the country is forecast to see farm business average net cash farm income decline. Most categories of farm businesses are expected to see declines, with dairy farm businesses expected to see the largest.

Total crop receipts are expected to increase $3.0 billion (1.5%) from 2017 levels following expected increases in corn and soybean cash receipts. Corn cash receipts are forecast up $1.9 billion (4.1%) due largely to expected higher prices, while soybean cash receipts are forecast up $1.8 billion (4.6%) due to expected higher quantities sold.

Total animal/animal product receipts are expected to decrease $0.4 billion (0.2%) as lower receipts for milk and meat animals are expected to more than offset higher receipts for poultry/eggs. Cash receipts for poultry/eggs are forecast up $4.0 billion (9.5%) due to expected higher prices and quantities sold for broilers and chicken eggs.

Cash receipts from cattle and calves are expected to decrease $0.9 billion (1.4%) as a forecast increase in quantity sold is more than offset by a forecast price decline. Hog cash receipts are expected to decline $1.1 billion (5.2%) in 2018, reflecting an expected price decline.

Broiler receipts are expected to rise $2.2 billion (7.2%) in 2018 as larger quantities are forecast to be sold at a higher price. Chicken egg receipts are expected to rise $2.9 billion (37.9%), reflecting larger quantities sold at a higher price. Turkey receipts are expected to decline $1.0 billion (20.7%) in 2018, with expectations of both declining prices and quantities sold.

Production expenses

Total production expenses (including operator dwelling expenses) are forecast up $14.8 billion (4.2%) in nominal terms to $369.1 billion in 2018, led by increases in spending on fuels/oil, interest, feed, and hired labor.

Interest expenses (including those associated with operator dwellings) are expected to increase for the fifth consecutive year, rising 18.1% ($3.4 billion in nominal terms, to $22.1 billion) in 2018. This increase is the result of rising interest rates on all new debt, as well as on existing variable-interest-rate debt, and higher forecast debt levels.

Feed expenses, which account for 18% of cash expenses, are forecast to increase 5.6% (to $58.3 billion) in 2018. This would be the first increase in feed expenses since 2014.

Counter to most other production expenses, spending on fertilizer, lime, and soil conditioner is forecast to decline 1.3% (to $21.8 billion) as fertilizer prices are expected to continue to decline slightly.

Farm debt is forecast to increase by $16.4 billion (4.2%) to $409.5 billion, led by an expected 5.4-percent rise in real estate debt. The farm sector debt-to-asset ratio is expected to rise from 13.13% in 2017 to 13.49% in 2018. Working capital is forecast to decline 31% from 2017.